|A packer machine packs Philip Morris' HEETS tobacco sticks for the IQOS holder at the tobacco maker's production facility in Yangsan, South Gyeongsang Province, in this file photo. / Courtesy of Philip Morris Korea|
By Park Jae-hyuk
YANGSAN, South Gyeongsang Province ― A packer machine steadily packed 500 packs of the Philip Morris' HEETS tobacco sticks per minute, Thursday, at Asia's first manufacturing plant that produces the specially designed heated tobacco unit which is intended for exclusive use with the IQOS holder.
At the two-story facility emitting a loud noise and a strong mint scent, piles of sticks slowly moved on a conveyor belt starting from the upper floor producing three types of filters and extending to the lower floor packing finished products, after combining the filters with tobacco plugs.
A worker in a white gown confidently told reporters that the factory's quality control is as strict as drugmakers'.
Philip Morris Korea, which operates this factory equipped with shiny new machines, said the high-quality heated tobacco units manufactured here are waiting to go on sale in the Korean market beginning late October.
The tobacco maker has expanded its existing manufacturing facilities in this southeastern industrial city with a 300 billion won ($263.4 million) investment since it announced its plan on the local production of HEETS in December 2017. The company also hired 340 additional employees and trained them here and at the global firm's affiliates in Europe.
Before the expansion, Philip Morris Korea had to import HEETS from Europe as its global headquarters built manufacturing facilities for the heated sticks only in Italy, Switzerland, Romania, Russia and Greece. Japan, one of the world's largest markets for IQOS, has also imported HEETS from Italy.
The company also plans to invest an additional 160 billion won and hire 360 additional workers by the end of 2019.
"The Yangsan factory is our first facility for dual-purpose, which means it can produce both conventional cigarettes and produce HEETS," said Philip Morris Korea Director of Operations Iryna Ashukina, who has led 700 factory workers since she came to Korea in August 2017.
"Here at Philip Morris Korea, our quality of goods we produce is superior. It's no not only about the state of our facility, equipment or investment. It's actually about our people."
The Ukrainian executive, who directed a Philip Morris factory in Romania before she came to Korea, said workers at the Yangsan factory will grow together with their company to achieve a smoke-free future.
Although Philip Morris Korea said it has yet to make any specific plans about the export of HEETS produced at the Yangsan factory, the company is highly expected to export them to Japan, Australia and other Asian nations, considering its exports of conventional cigarettes to those countries.
As the exporter of made-in-Korea Marlboro, Parliaments, Virginia Slims and Lark, the company even received the $100 million Export Tower Award in 2015.
"The Yangsan factory will not only supply the Korean market but is expected to pave the way for exports going forward," said Brian Kim, corporate affairs director of Philip Morris Korea.
The Korean production will also help the company meet the demands of local customers quicker than before.
In addition, the production of HEETS in Korea will allow Philip Morris Korea to be free of a 40 percent tariff imposed on the product, enhancing its price competitiveness, amid the increasing taxes on tobacco sticks for heat-not-burn (HNB) devices.
As the National Assembly passed a bill to raise taxes on HNB products in 2017, Philip Morris Korea increased the retail price of HEETS from 4,300 won a pack to 4,500 won.
The company said domestic production enabled it to minimize the price hike.